Aurora Mobile Limited

Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. And to withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your host today, Rene Van Gussien. Please go ahead, sir.

Thank you, Michelle. Hello, everyone, and thank you for joining us today. Aurora Mobile's earnings release was distributed earlier today and is available on the IR website at ir.gguang.cn. On the call today are Mr. Wei-Dong Luo, Chairman and Chief Executive Officer, Mr. Shan-Nan Bong, Chief Financial Officer, and Mr. Guan Yan Chen, General Manager. Following their prepared remarks, they will be available to answer your questions during the Q&A session that follows. Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions, which are difficult to predict and may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties and or factors are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information future events or otherwise, except as required under applicable law. With that, I would now like to turn the conference over to Mr. Luo. Please go ahead.

Thank you, Sirene. Greetings to all. Welcome to AromaBus 2025 first quarter earnings call. Before I comment on our Q3 results, I would like to remind everyone that the quarterly earnings debt is available on our IR website. You may refer to the debt as we proceed with the quarter date. Without further ado, let's get started. As we did in the past, based on the Q3 earnings numbers, the suitable description I will give to the first quarter result is good things come in pairs. Because we record the first ever back-to-back quarterly net gap profit in our history, following the mundane net gap profit last quarter, our strong business performance carried us across the line again in Q3. Let me elaborate more on the strong business we have had in this quarter. Firstly, the group's revenue this quarter of remain be 19.9 million. achieving a remarkable 15% year-for-year and 1% sequential growth. This will be 19.9 million was at a very high end of the guidance we have provided. Secondly, our global flagship product, Engagelab, continued its great momentum with another quarter of great numbers. Engagelab recorded very strong quarterly growth in customer number and contract value growth. In particular, Engaged Apps ARR for September 2025 stood strong and reached a new milestone at RMB $53.7 million. It has grown by 160% year-over-year. Thirdly, our financial risk management business had its best quarter yet, recording highest quarterly revenue of RMB $22.6 million with growth of 33% year-over-year. Gross profit exceeded our expectation and grew strongly by 20% year-over-year while achieving the highest gross profit for the past 15 quarters. Gross margin has also improved year-over-year and quarter-of-quarter. Last but not least, having all the great numbers above is great. It's equally important that we are generating positive cash flow and in great cash position. Indeed we are. The net operating cash inflow of Renminbi, 23.3 million, record the highest level since Q4 of 2020. It is very humbling for me to share with you all on yet another stellar quarterly financial results. As I mentioned in the pre-earnings call, achieving historical gap net profit was not easy. For us to have back-to-back gap net profit is simply a great achievement for AruMobile. To achieve that, all the processes in the organization work really well for the entire full quarter of 2025. Our hard work and commitment to AruMobile will not stop here. There are more we need to achieve together, and we will. Short of giving our promise on this call, I truly hope for all the team's dedication on execution on our group strategy and going forward. Now, let me share more on the individual business performance. Our total Q3 group revenue has grown both year-over-year and quarter-over-quarter. In particular, revenue grew 1.5% year-over-year driven by strong numbers from developer services and financial risk management basis. Again, in this quarter, OBC's segment, many developers' subscription services, value-added services, and vertical applications record solid acceleration with double-digital year-over-year revenue growth. This is the second consecutive quarter we have such a strong revenue growth momentum. Developers' services revenue, which consists of subscription services and value-added services, increased by a strong 12% growth year-over-year and flat quarter-of-quarter. Subscription revenue has solid revenue numbers where it increased by 11% year-over-year and increased 7% quarter-over-quarter. Value-added services revenue grew by an impressive 22% year-over-year but decreased 34% quarter-over-quarter. Our core business developed subscription services with revenue of maybe 57.3 million, recorded growth of 11% year-over-year and 7% quarter-over-quarter. The year-for-year revenue growth was mainly driven by increase in both customer numbers and ARPU. Subscription revenue record the fifth consecutive quarter of revenue be 50 million plus revenue and reached its highest level in history in this quarter. Next, let me share more on our global flagship product and get you that. which continues its excellent growth acceleration part of quarter after quarter since its introduction. Firstly, EngageLabs ARR has reached a new and important milestone of maybe 53.7 million marked in September 2025. This 160% year-over-year ARR growth was just impressive. Secondly, we have another very strong quarter for EngageNet, where the cumulative contract value we have signed amounts to RMB 128 million by the end of Q3 of 2025. In Q3 alone, we signed up more than RMB 1.5 million worth of new contracts. This is just outstanding. We do expect this revenue growth momentum to continue for the next 24 months. Further, global customers from all corners of the world continue to purchase our products and services. The customer number has increased by 156% year-over-year, reaching 1,300 in total. This was driven by the continued progress we are making for our global go-to-market effort. Firstly, our engagement products and services are now sold to customers in more than 52 different countries and regions globally. This is a great testament that our global flagship product, Engagelet, is indeed a globally accepted product from customers originating from all four corners of the world. Our global flagship product, Engagelet, has a very unique and different position in the market. We have been taking market share from competitors in all of the overseas markets we operate in. This is evident from the growth rate of Engagelet we have seen today. From the market intelligence we have gathered, it shows that the demand for our Engagelab products and services remains strong. With this great result delivered by Engagelab, it once again reinforced my strong belief that this global, fresh product is the toast bell as far as revenue growth is concerned for us in the next 12 months, or 24 months. Within subscription revenue, Some of the notable wins in the quarter include, but not limited to, Deep Seek, Shanghai Disneyland, BYD, and China Eastern Airlines, just to name a few. Value added services revenue will remain be 7.1 million, increased by 22% year-over-year, but decreased by 34% quarter-of-quarter. The solid revenue year-over-year growth was mainly due to the increase in new advertisers acquired between the years. the absence of traditional quarter online shopping face-to-face results in the negative revenue growth sequentially. Now, let me pass the call over to Shen Ye, who will share more about the medical application and other aspects of our financial performance for this quarter.

Thanks, Chris. Next, I'll go over the revenue for a particular application that includes financial risk management and market intelligence. Vertical application had a good quarter where revenue grew both year-over-year and quarter-over-quarter. Within vertical application, financial risk management recorded a significant 33% growth in revenue year-over-year and 3% quarter-over-quarter. Following the strong Q2, financial risk management had a sequential excellent quarter. It has now the third consecutive quarters of revenue in excess of only 21 million under its belt. Another significant milestone for this business is that it recorded the highest quarterly revenue in history of RMB 22.6 million in this quarter. This 33% year-over-year revenue growth was mainly due to a strong 44% in customer number growth. The customers that we sign up or renew in Q3 include, but not limited to, Lesing, Xiaoying Keji, Ningbo Bank, and many more licensed credit and financial institution throughout China. Market intelligence revenue, on the other hand, decreased by 23% year-over-year and 2% quarter-over-quarter due to the continued weak demand for the Chinese APP data. And this result is in line with our expectation. Next, I'll go over some of the P&L and balance sheet items. Our gross profit. had spectacular results too in this quarter where it grew 20% year-over-year and 7% quarter-over-quarter. The Roman P63.8 million gross profit we had was also the highest gross profit for the past 15 quarters. With the group revenues grew 15% year-over-year, yet our gross profit grew by 20% year-over-year, it shows that we had recorded very high margin revenue in this quarter. This is certainly a key target that we would like to maintain and extend beyond this quarter. Onto operating expenses. The Q3 operating expenses was at maybe $64.4 million, representing a 12.8% increase year-over-year and increase of 5.8% quarter-over-quarter. Operationally, our Q3 revenue grew by 15% year-over-year, while OPEX only grew by 12.8%. Overall, we are pleased to see how we have been controlling OPEX to support the double-digit revenue growth across our business line. I'll now dive deeper into the individual OPEX category. For R&D, expenses increased by 7% year-over-year to RMB $25.9 million, mainly due to the increase in staff costs and associated expenses. Technical service fee and cloud costs also contributed to the year-over-year increase in R&D expenses. Selling and marketing expenses increased by 19% year-over-year to RMB 26.6 million, mainly due to the increase in sales commission in line with revenue growth and the cash collection in this quarter. Marketing expenses for investment in global business expansion also contributed to the year-over-year increase in selling and marketing expenses. G&A expenses increased by 13% year-over-year to RMB 11.9 million, mainly due to increase in staff costs, professional fees, and better provision. Next, I'll share three very important KPIs that we closely monitor. For NDR, which means Net Dollar Pension Rate, a commonly used KPI for SaaS companies, it stood at 104% for core developer service business for the trailing 12 months ended September 30th, 2025. And this is the very first time where NDR numbers have exceeded 100% milestone. The number says it all. It means customer retention rate coupled with the fact that our customer has increased their spending with us through upsell, upgrades, and expansion. And this is the best testament of our sustainable SaaS business. Secondly, another important financial KPI for tracking the performance of SaaS company is total deferred revenue. which represents cash collected in advance from customers for future contract performance, which was at historical high of RMB 166.3 million. And this high deferred revenue balance is a hallmark of a high-quality scalable business. It signifies a strong customer loyalty, predictable future revenue, healthy cash flow, and effective sales strategy. Thirdly, we continue to maintain healthy AR turnover days level at 49 days and this remains at the industry leading level. We will continue to work hard to ensure we actively and timely collecting cash from customers and at the same time mitigating the risk of bad and doubtful debts. On the cash flow, we recorded another great numbers. For the quarter ended September 30th, 2025, we recorded net operating activities cash inflow of $23.3 million. This is the best quarterly cash flow numbers we have since Q4 of 2020. On to balance sheet. Total assets were RMB $388.2 million as of September 30th, 2025. This includes cash and cash equivalent of $141.2 million, accounts receivable of $43.9 million, prepayments and other assets of $15.7 million, Operating list right of use assets of $15.9 million, fixed assets of $2.9 million, long-term investment of $113 million, goodwill of $37.8 million, and intangible assets of $11.5 million resulting from SendCloud acquisition in March 2022. Total current liabilities were at $274.6 million as of September 30, 2025, and these include accounts payable of 31.9 million, other operating liabilities of 4.1 million, deferred revenue of 166.3 million, accrued liabilities of 72.3 million. And now let me take a few minutes here to recap the description, good things come in pairs that Chris mentioned at the beginning of this call. In this quarter, we have many great achievements that I would like to take a few minutes to reiterate. We achieved our very first back-to-back gap net profit in history. Number two, our core developer subscription business had its best revenue in history of $57.3 million, as did the financial risk management business. Our flagship product, EngageLab, continued its expansion beyond the shores. Apart from great growth in customer's number and contract value, EngageLab business reached another very important key milestone, where the ARR was at RMB 53.7 million in September 2025, representing a stunning 160% year-over-year growth. Gross profit grew 20% year-over-year and recorded its highest levels for the past 15 quarters. Number five, operating activities brought in net cash inflow of RMB 33.3 million. Our NDR, net dollar retention for core developer service recorded at the best number in history of 104%. And now let's turn to business outlook. Based on the current available information, the company sees the Q4 2025 revenue guidance to be in the range of RMB 94 million to RMB 96 million, representing a solid growth of 1% to 3% year-over-year compared to the same quarter, 2024. The above outlook is based on the current market conditions and reflects the company's current and preliminary estimate of the market and operating conditions and customer demands, which are all subject to change. And before I conclude, I'll give a quick update on the share repurchase plan. In this quarter, ended September 30th, 2025, we repurchased 4,000 ADS. Cumulatively, we have repurchased a total of 327,000 ADS since the start of our repurchase program. And today, our board of directors of the company approved a share repurchase program whereby the company is authorized to repurchase up to US dollars 10 million worth of its ordinary share, including in the form of ADS during the 12-month period starting today. And this is a 100% increase from the US dollars 5 million program we had previously. The company proposed repurchase may be made from time to time in the open market at a prevailing market price, in private negotiated transaction, in block trades, and or through other legally permissible means, depending on the market conditions and in accordance with the applicable rules and regulations. The company's board of directors will review the share repurchase program periodically and may authorize adjustment in terms of size and terms. The company expects to fund the repurchase of existing cash. And this concludes our prepared remarks. We'll be happy to take your question now. Operator, please proceed.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 11 again. And our first question will come from Calvin Wong with Spica Capital. Your line is now open.

Good evening, management. Thank you for taking my questions. First of all, congrats for delivering another set of stunning results this quarter. I have only one question. Based on my reading of the earnings release, I noticed the strength of Engagelab business and how it strengthened the group's financial results. So I would appreciate if management could tell us more about Engagelab and why the growth trajectory has been so strong since day one. Thank you.

Let me take this call. Kevin, good to hear from you again and thanks for your interest. And I'll take your earlier statement about Engagelab's growth trajectory has been strong since day one. And this is factual, and we are very proud of the achievement since day one. And for those listeners who have access to our ER deck that we have uploaded to the IR webpage, you can refer to, I think, slide number three, where we have the pictorial display or diagram of engaged lab business to date. And one new particular data point that we have included in this quarter's earning deck is the ARR, is the Annual Recurring revenue for EngageLab business. And for the month of September 2025, the ARR was at 53.7 million. And this is a 160% jump from a year ago. And we are very encouraged by this number because it shows that the business has a very significant growth trajectory and we have made great revenue expansion in just 12 months. I would say the success of EngageLab is not by chance or that we are lucky. It was a result of endless improvement, upgrades that we made to the product and service offering that help us to acquire more new customers and retain existing customers globally. If you look back, when Chris decided to launch EngageLab back in Q4 of 2022, the mission was pure and direct, just to address our customers' main needs of reaching out and engaging with their users in a cost-efficient and effective manner. And through EngageLab, our customers are able to reach and engage with their users through any one or all of the following messaging channels, such as app push, web push, email, SMS, WhatsApp, and OTP. And also from a technical standpoint, we have done all the heavy lifting for our customers too. To deliver the global solution for our customers, we have invested heavily in data facility in eight cities globally. And just this week, we have launched a new data center in Turkey, further expanding our global infrastructure. That aside, we have also incorporated our notification channel for all different operating systems, from iOS to Android, from HarmonyOS to others. And it makes it easy and efficient for our customers to ensure that their notifications are delivered no matter where their users are and what phone they are using. And maybe you can think of EngageLab as reaching your users without borders. And for service-wise, we have received countless compliments from our customers that our customer service team are very responsive and deliver a much better service than our peers. And this says a lot from a customer standpoint. And when they encounter issues, they need solutions. And this is something that we can deliver and we are proud of it. And therefore, with such a great value proposition, where customers can get one-stop engagement platform and great services all wrapped in one, and it is not hard to see why EngageLab has been able to deliver such great numbers quarter over quarters. And historical results aside, and both Chris and myself have great hopes and confidence in the EngageLab business going forward. As Chris rightly called out during the call earlier, EngageLab is the torchbearer for our revenue growth in the next 24 months. And Kevin, I hope this answers your question adequately.

Great to hear that. It's very clear. Thanks.

Thank you. And our next question will come from Jackson with Galingui Research. Your line is open.

Good evening. I'm Jackson from Galingui Research. Thank you, management, for taking my question. Congratulations on another good quarter with solid earnings, in particular two consecutive quarters with gas net profit. Well done. I have a question for the management. Help me to recap what went well in Q3 that delivered another quarter with gas net profit. Thank you.

Hi, Jack. Thanks for the question. Yeah, it was a great quarter indeed. Chris mentioned we executed very well operationally and everything just went well and this flow on to our financials number that we have released earlier today. There are a couple of things I can share more. Firstly, revenue in Q3 has been very strong. All business line recorded great year-over-year double-digit growth. What that means is we are now head and shoulder above where we were a year ago. And both the subscription business and the financial risk management recorded their own best revenue quarter in history. Equally important is the revenue by EngageLab, where it contributed maybe $13 million in this quarter alone, also a historical high. We grew our revenue not at the expense of sacrificing margins. This is evident that while we grew our revenue, significantly, our gross profit reached the highest level for the past 15 quarters. At the same time, our gross margin increased year-over-year and quarter-over-quarter too. This is a really hard act to follow. Since revenue gross profit grew at a faster pace than our OPEX, the U.S. GAAP net profit is a certainty, which is why we had the second consecutive quarter of U.S. GAAP net profit. And two other important and great KPIs that I would like to reiterate here. One is the NDR, where we reached 104% for our core developer subscription business. And this is the very first time NDR exceeded 100%. And what that means is simple and straightforward. Our customer has been buying more of our services between the periods through upgrades, upsell, and other services. And this is a great number to have. And secondly, is the deferred revenue balance of $166.3 million, another historical high balance. In short, we have $166.3 million worth of secure revenue that we can recognize in the future, and the best part is we have already received the cash. So for this $166.3 million, we don't even have to worry about cash collection effort or the risk of bad debt in the future. And managing cash flow has also yielded great results. In this quarter, we have net operating cash inflow of $23.3 million, the highest level for the past 20 quarters, which is actually the five years, the past five years, the best results. And with that positive inflow of cash, our 930 quarter end cash balance has also climbed to $141.2 million, the highest balance in the past 14 quarters. It improved by 40% year over year. As you can see, it is not hard for you or anyone to conclude that this quarter has been great. And however, rest assured that we are not contented by the present. We need to move faster and expand more. Therefore, we will continue to invest as part of our global growth plan. And lastly, if time permits, I would like to cordially invite you and other investors to drop by our Sanjuan Head Office. We are more than happy to host you and chat with greater detail for any questions you might have. This is my answer to your question, Jack.

Okay, thank you. That's very clear. I appreciate that.

Thank you. I show no further questions in the queue at this time. I would like to turn the call back over to Rene for closing remarks.

Thank you, everyone, for joining our call tonight. If you have any further questions and comments, please don't hesitate to reach out to the IR team. This concludes the call. Have a good night. Thank you all.

This does conclude the conference call. Thank you for participating, and you may now disconnect.